Originations

Sunstone Hotel Investors Inc., a real estate investment trust based in San Clemente, Calif., has closed a four-year, $200 million unsecured revolving credit facility.The REIT said the facility replaces a $150 million secured revolving facility and bears interest at a spread over the London interbank offered rate that is 25 basis points lower than the previous facility's. The joint lead arrangers and joint book-running managers of the facility were Citicorp North America Inc. and Wachovia Capital Markets LLC. The REIT can be found online at http://www.sunstonehotels.com.

Christopher Peatross has been named chief executive officer of CarrAmerica, a real estate company based in Washington, D.C., and Kurt Heister has been named chief financial officer of the company.CarrAmerica also announced the appointments of Ken Simmons as senior vice president of the Washington, D.C. Development Group; Bill Simpson as chief information officer; and Howard Weissman as controller. In addition, the following individuals were named managing directors: Jeff Pace, for Chicago, Dallas, Denver, Salt Lake City, and Austin, Texas; Malcolm O'Donnell, for Southern California; Clete Casper, for Seattle and Portland, Ore.; and Phillip Thomas, for metropolitan Washington, D.C. CarrAmerica announced the appointments a few days after the July 13 close of its merger with an affiliate of The Blackstone Group, a New York-based commercial real estate investor. The companies can be found on the Web at http://www.carramerica.com and http://www.blackstone.com.

Changes in the California housing market are paving the way for rising downtown housing densities and more affordable housing units, according to the Lusk Center for Real Estate at the University of Southern California."The limited supply of land and stringent entitlement requirements in markets such as California have pushed up development costs," the USC Lusk Center said. "In response, developers are shifting towards high-density projects so the project can get financed." The Lusk Center said people in their 20s and 30s are increasingly choosing to live in downtown high-rise complexes that are "close to their jobs and exciting cultural centers." The Lusk Center can be found online at http://www.usc.edu/lusk.

Sovereign Bancorp Inc., Philadelphia, has reported a mortgage-related loss of $51.7 million ($0.11 per share) for the second quarter, down from net earnings of $183 million ($0.45 per share) a year earlier.The loss for the quarter included a $43.9 million ($0.10 per share) after-tax, noncash, non-operating impairment charge in the value of Fannie Mae and Freddie Mac preferred stock. Other charges included $4.1 million after-tax ($0.01 per share) for merger and integration expenses plus $8.1 million ($0.02) after-tax for credit losses related to the acquisition of Independence Community Bank Corp., Brooklyn, N.Y., a mortgage warehouse and commercial real estate lender. The Independence acquisition was part of a three-way transaction that led to Banco Santander Central Hispano SA, Madrid, taking an equity position in Sovereign. Mortgage banking revenues at Sovereign totaled $4.5 million for the quarter, down from $13.0 million in the first quarter and $21.3 million in the second quarter of 2005. The drop in revenue was due to keeping more mortgage originations -- those of higher credit quality -- on its balance sheet.

MGIC Investment Corp., the nation's largest mortgage insurance company, earned $149.8 million in the second quarter, a 14% decline from its earnings a year earlier.The Milwaukee-based MGIC also reported that its delinquencies (which include bulk insurance coverage) increased to 5.77% in the quarter, compared with 5.62% at June 30, 2005. MGIC issued $16.1 billion in new MI policies during the quarter, compared with $16.6 billion a year ago. Its delinquency inventory now stands at 73,354 units, of which it attributes 1,650 to damage caused by hurricanes Katrina and Rita. At the end of June it had $169.8 billion of insurance-in-force. In trading on Wednesday, its shares were up slightly, to $59.07. Its 52-week high is $72.73, its low $65.70.

The Market Composite Index, an overall measure of mortgage applications, fell from 566.8 to 540.8 on a seasonally adjusted basis during the week ended July 14, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey.On an unadjusted basis, applications increased 36.4% on the week but were down 31.3% from the level recorded a year earlier. The Purchase Index fell from 425.0 to 398.5 on a seasonally adjusted basis, while the Refinance Index declined from 1400.5 to 1377.6. Refinancings represented 35.0% of total applications, up from 34.0% the previous week, while adjustable-rate mortgages accounted for 29.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages decreased from 6.81% to 6.73%, and points (including the origination fee) increased from 1.06 to 1.13 for loans with 80% loan-to-value ratios, the association reported.

Single-family housing starts fell by 6.5% in June to a seasonally adjusted annual rate of 1.486 million units, according to new figures released by the Commerce Department.In the Northeast, starts plunged by 32.8% (from the level in May), with some of the decline being blamed on harsh rainstorms in the region. Compared with those of the same month a year ago, starts fell 13.8% nationwide. "The clear downtrend in permits suggests that builders are scaling back their plans for new construction in the months ahead in the face of declining orders and higher cancellation rates," said Greenwich Capital analyst Omair Sharif. Total starts (which include multifamily) fell by 5.3% in June. Meanwhile, builder confidence (as tracked by the National Association of Home Builders) fell again, and a new report by Merrill Lynch is telling equity investors to avoid buying homebuilding stocks. "It still seems too late in the economic and interest rate cycles to overweight the group," Merrill says in a new report.

First Potomac Realty Trust, Bethesda, Md., has priced a follow-on public offering of 3.0 million common shares of beneficial interest at $27.46 per share.First Potomac, a real estate investment trust, said the net proceeds of approximately $78.4 million will be used to fund pending acquisitions and to pay down the balance on a $125 million unsecured revolving credit facility. KeyBanc Capital Markets was the sole book-running manager for the transaction. First Potomac can be found online at http://www.first-potomac.com.

Zacks Equity Research, Chicago, announced Monday that it had made Equity Office Properties Trust its "Bear of the Day" -- a stock expected to underperform the markets over the next three to six months -- for July 17.Zacks said the Chicago-based real estate investment trust continued to experience poor operations in the first quarter, with large rent rolldowns, low (but rising) occupancies, and high capital expenditures. "Earnings will continue to suffer dilution through dispositions, as the company cannot replace lost income fast enough," Zacks said. The company said there are better office REIT alternatives with safer dividends, but added that "we are starting to see improving fundamentals in some of the company's key markets." Zacks can be found online at http://www.zacks.com, and the REIT can be found at http://www.equityoffice.com.

Rural Community Assistance Corp., West Sacramento, Calif., says a growing number of working Californians are being priced out of the ranks of homeownership.RCAC said the housing boom of 2005 "drastically improved" the net worth of many homeowners, but also pushed "a record number of working Californians into the already huge group that can't afford to buy a home." RCAC recently released a top-10 list of Workers in California Who Can't Afford a Home, which included police officers, firefighters, teachers, nurses, construction workers, and truck drivers. William French, RCAC's chief executive officer, said it was no surprise that many people are unable to afford a home. "What was startling, however, was the increased number of hard-working Californians -- with what are considered good-paying jobs -- who cannot currently qualify to own a home in this state," Mr. French said. The organization can be found online at http://www.rcac.org.

One lender discovered that a large percentage of its customers who applied for stated-income loans exaggerated their incomes by more than 50%, according to the Mortgage Asset Research Institute.The unidentified lender sampled 100 of its stated-income loans and checked the borrowers' salaries with the Internal Revenue Service. "Ninety percent of the stated incomes were exaggerated by 5% or more," MARI said in a recent report to the Mortgage Bankers Association. "More disturbingly, almost 60% of the stated amounts were exaggerated by more than 50%." Lenders that don't require income verification are opening the door to fraudsters, MARI warns. "These results suggest that the stated-income loan deserves the nickname used by many in the industry -- the 'liar's loan'."

HUD General Counsel Keith Gottfried is working on a compliance assistance process that would allow lenders and settlement service providers to seek legal guidance on Real Estate Settlement Procedures Act issues."We want the industry to be innovative, and they can't be innovative if they have to worry about an enforcement action," Mr. Gottfried said in an interview. The general counsel is drafting a proposed rule that will allow the Department of Housing and Urban Development to issue no-action letters -- signaling that the department will not take enforcement actions against a company that is trying to make the homebuying process more transparent and less burdensome. "I have already drafted about 24 pages of this regulation," he said, and it is being circulated within the department. HUD has to start acting more like a regulatory agency, he said, by putting out guidance, staff bulletins, and interpretations on a timely basis. Besides RESPA, compliance assistance would be provided on fair housing, public housing, and other issues under HUD's jurisdiction.

National City Corp., Cleveland, took a $115 million hit in the second quarter due to hedging losses on its residential servicing portfolio.The company -- which is contemplating exiting the subprime business -- has taken $243 million in servicing-related hedging losses so far this year. The entire bank, overall, earned $473 million in the quarter, but its A-paper mortgage unit lost $52 million. Its residential subprime business, though, had a strong second quarter, posting a $148 million profit. (Its net mortgage profit for the quarter totaled $96 million.) NatCity has adopted a policy of selling into the secondary market all subprime loans funded by its First Franklin Financial affiliate. During a conference call on July 18, company officials blamed the hedging losses on the implementation of a new model to estimate mortgage loan prepayments. In a statement, it notes that prepayments "are a significant factor" in determining the asset value of mortgage servicing rights. Even though the bank may sell First Franklin, it called the company a "fabulous" business.

The mortgage affiliates of Wells Fargo Bank funded $116 billion in residential loans during the second quarter, a hair shy of matching the industry leader, Countrywide Home Loans, Calabasas, Calif.In total, Wells Fargo Home Mortgage, San Francisco, saw its production increase by 36% from that of the same quarter last year. Compared with that of the first quarter, production rose 27%. Countrywide, which has been the No. 1-ranked funder since 2004, originated $117 billion in the second quarter, a 3% decline from the level recorded a year earlier. Mark Oman, executive vice president of home and consumer finance for Wells, said the bank-owned lender "took advantage of market opportunities in the correspondent channel" during the quarter. At the end of June, WFHM serviced $1.11 trillion in residential loans, compared with $1.20 trillion for Countrywide.

SL Green Realty Corp., a New York-based real estate investment trust, has priced a public offering of 2.5 million shares of common stock, for estimated net proceeds of $269.4 million.The office REIT said it plans to use the proceeds to fund future investment activity and pay down its credit facility. Lehman Brothers, the sole underwriter for the offering, has been granted an option to buy up to 250,000 additional shares of the stock to cover any overallotments. SL Green can be found online at http://www.slgreen.com.

Moody's Investors Service has named Nicholas Levidy and Paolo Obias managing directors in its commercial mortgage-backed securities group.Mr. Levidy joined Moody's in 1998 as a vice president/senior analyst. Before joining the credit rating agency, Mr. Levidy was a senior counsel for real estate and corporate finance with PNC Bank, according to Moody's. He will continue to report to Tad Philipp, co-head of Moody's U.S. CMBS group. Mr. Obias joined Moody's in 1997. From 1999-2001, he worked in the rating agency's Tokyo office. Prior to joining Moody's, Mr. Obias held professional positions at two Indonesian real estate firms, Moody's said. He will continue to report to Jim Duca, co-head of Moody's U.S. CMBS group. The rating agency can be found online at http://www.moodys.com.

Cushman & Wakefield Finance Ltd., a commercial real estate services firm with offices around the world, and BGC International, an inter-dealer brokerage firm, have announced a joint venture agreement to provide strategic and execution services in the European property derivatives market.The venture, Cushman & Wakefield BGC, is designed to "significantly increase liquidity" in the property derivatives market, which "is poised for exponential growth," the two firms said. The joint venture is also aimed at developing innovative, structured products tailored to the end user's requirements, they said. C&W can be found on the Web at http://www.cushmanwakefield.com.

Corporate Office Properties Trust, a real estate investment trust based in Columbia, Md., has priced an offering of 3.0 million shares of 7.625% series J cumulative redeemable preferred stock at $25 per share.The issue is expected to produce gross proceeds of $72.4 million, the office REIT said. The underwriters were granted an option to buy up to 450,000 additional shares to cover any overallotments. Wachovia Capital Markets LLC was the book-running manager of the issue. The REIT can be found online at http://www.copt.com.

Classes M-5 and M-6 of First Franklin Mortgage Loan Trust 2003-FFH1 have been placed under review for possible downgrade by Moody's Investors Service.The actions were attributed to low credit enhancement levels relative to current loss projections for the deal, which consists of first-lien subprime residential mortgage loans. Due to credit defaults, excess spread is being used to cover losses and the overcollateralization is "eroding far below its target," the rating agency said.

Five classes of Asset Backed Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and two classes have been removed from Rating Watch Negative.The downgrades were as follows: series 2001-HE1, class M-2, from A to BBB-plus, and class B, from BBB-minus to BB; series 2002-HE2, class B, from BBB-minus to BB-minus; and series 2003-HE1, class M-3, from BBB to BB, and class M-4, from BBB-minus to BB-minus. The two classes from series 2003-HE1 were also removed from Rating Watch Negative. In addition, Fitch affirmed the ratings on four classes in the three ABSC deals. The rating agency attributed the downgrades to a deterioration in the relationship between loss expectations and credit enhancement. The transactions consist of fixed- and adjustable-rate subprime residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.